Milton Wray | Bid to undermine retail businesses

All of Jamaica’s business persons operating in the retail trade should be very concerned by an ominous announcement this week from Minister without Portfolio in the Agriculture Ministry, J.C. Hutchinson. He announced that the Government will be establishing its own food marts islandwide, to distribute produce at sub-par prices. The announcement should be most worrying, as it signals a pattern of interference in the retail trade by the State. It is a trend that first emerged when Government established its own chain of retail pharmacies islandwide, to distribute pharmaceutical goods for free and at suppressed prices, undercutting legitimate businesses in the retail private sector.

Our business leaders seemed unconcerned when it happened to pharmacies, despite warnings that, if the Government is allowed to do it with the pharmacy sector, then the State could choose to establish its own chains of supermarkets, wholesales, haberdasheries, hardware stores or any other enterprise to distribute any goods of its choice for free or at minimal prices, thereby posing a serious threat to businesses. Investors should never accept such a possibility hanging over their heads, and, in fact, it is exactly the scenario guarded against by our Fair Competition Act (FCA).

However, most unfortunate of all is the fact that the country’s competition watchdog and enforcer of the FCA, the Fair Trading Commission (FTC), can identify nothing wrong with such a scenario. Complaints to the FTC have been rebuffed with reams of technical gibberish and severely inaccurate obfuscations, in order to protect the status quo. Because the FTC has been derelict in its duties, come next week, our Government could choose to establish an islandwide chain of corner shops to give away items for free or at peppercorn prices, putting existing corner shops out of business.

CUTTING OUT MIDDLEMAN

According to Minister Hutchinson, as reported by The Gleaner of Monday, June 15, food marts will be set up across Jamaica to retail produce at prices way below the regular values. He is quoted as saying, “Residents will be able to purchase produce at a much more reasonable price than at the markets.” In a most frightening manner that signifies a deliberate attempt to quash businesspeople, Hutchinson announced, “We are cutting out the middleman.”

It does not matter to the Government whether the middleman made investments from bank credit, with financial obligations to his creditors, suppliers, staff and other dependants. Bear in mind that the middleman’s investments would have been made on the expectations of a fair, just and level playing field. Most important, contrary to the perception created, the middleman is not some rapacious, wicked, wealthy mercenary. In this case, the middleman is the simple market vendor peddling produce for pennies in profit margins.

A consequence of Hutchinson’s move is that the market woman from rural Jamaica trucking her produce to Coronation Market will now have to unfairly compete for customers with the State apparatus. So, even while farmers and consumers may benefit from increased sales and lower prices respectively, the question is whether those benefits can’t be realised without sacrificing the trades of vendors operating in our markets.

FREE MARKET SYSTEM

Hutchinson and successive administrations seem to be forgetting that, by law, Jamaica operates under a free market system, whereby prices are to be determined by market variables including supply and demand and competitive forces – the very competition that Government intervention in trade erodes. These socialism-type overreaches by the State are not compatible with our free-market economic structures, and are, in fact, unlawful.

It is most astonishing that a very simple principle slips the grasp of the minds of well-learned men. The truth is that Government has no business competing against retailers, let alone unfairly competing by offering goods for free and at undervalue prices. Like any other legitimate business, enterprises and vendors operating in the retail trade must be allowed to be able to operate at a profit in order for such ventures to be sustained, especially since small businesses are widely acknowledged as the engine of economic growth. With its vast State resources and dominant position, Government will reign supreme in any competition with small businesspeople. It is simply impossible for regular retailers to fairly compete with a State offering freeness and undervalue goods, no matter what the Fair Trading Commission says.

Faced with the dichotomy of providing for the poor while encouraging the flourishing of businesses, successive administrations have chosen to provide for the poor while ignoring the effects on businesses. In fact, in the case of the pharmacy sector, Government welfare does not benefit only the poor, but the rich too, and at the expense of modest businesspeople.

The State should help poor people, but any help must be executed in such a manner that there are no adverse effects on businesses. Its vast technical, personnel and financial resources should be engaged by the State to design mechanisms and systems whereby welfare programmes do not undermine businesses. A mark of good governance is the ability to implement policies that are equitable, balanced and well-considered.

Correspondence on the seriousness of the matter dispatched to the Private Sector Organisation of Jamaica has gone unacknowledged. Detailed complaints to the Fair Trading Commission, dating back to 2004, have been repelled with excuses in a seeming attempt to not upset the apple cart. The truth is that it is all a matter to be settled once and for all through legal channels.

Milton Wray is a communications specialist and pharmacy owner. Send feedback to miltonwray@gmail.com.